Making Cash Flow Predictable With Faster Card Payment Settlement

Commercial credit cards are an attractive payment method for senders and recipients alike. In addition to the opportunity for payers to take advantage of rebates and rewards, cards can play an important role in managing cash flow, enabling buyers to benefit from extra capital float while still connecting suppliers to funds (thus supporting the vendor’s cash flow, too).

But amid the rise of real-time payments, the economy is increasingly pushing for not just faster payments, but also faster settlement. That’s particularly true for smaller businesses at a time when cash flow is vital to the ability to survive pandemic-related market volatility.

According to Amanda Mesler, CEO of U.K.-based Cashflows, the waiting period between when a company has been sent a card payment and when those funds actually settle into a company bank account can be a major pain point. “A small business needs to have cash that is already due to them after they process a payment,” she told PYMNTS in a recent interview. “This typically takes days, sometimes weeks.”

Accelerating Settlement

In an effort to connect businesses more quickly to the funds they have earned, Cashflows recently announced the launch of Anytime Settlement. Mesler explained that the service is the result of Cashflows’ proprietary card processing infrastructure, which automates settlement rather than relying on manual flows or a third-party service provider.

B2B payments are the “sweet spot” for the solution, she noted, highlighting the quickly accelerating digitization of payments — and the enterprise as a whole — across the U.K. as a result of the pandemic. Society is shifting toward a cashless paradigm, and the coronavirus crisis has accelerated that move dramatically, said Mesler.

But accelerating card payment settlement is not always a straightforward process, particularly in markets like the U.K. and Europe, where PSD2 regulations are placing greater compliance burdens on payment service providers. The ongoing implementation of strong customer authentication (SCA) requirements have been particularly challenging in the online card payment space, and have created some uncertainties and confusion in the commercial card arena in particular.

As an entity regulated by the Financial Conduct Authority (FCA), Cashflows must not only remain compliant with such regulations, but must also adhere to the individual requirements of the card schemes of Visa, Mastercard and other industry leaders, which often adjust and change those requirements. Agility, said Mesler, is a vital component of remaining compliant and secure from the get-go.

“The onboarding side is key,” she noted. “That means AML [anti-money laundering] and KYC [know your customer] checks to ensure that you know who it is you’re actually doing business with.”

Accelerated onboarding workflows have also helped to reduce the time and friction associated with processing card payments.

A Real-Time Ecosystem

The value of faster card payment settlement goes beyond connecting businesses to their earned capital more quickly. According to Mesler, the predictability of working capital can be just as critical to the financial well-being of a business, with Anytime Settlement allowing businesses to actually choose specific times or days that card transactions are settled.

As the payments landscape accelerates, the harmony between faster access to capital and cash flow predictability will continue to become important requirements among corporates, not only from their card payment solution providers, but also from the overall financial services community.

As such, Mesler said that offering businesses the choice of how they accept payments and receive funds is important, pointing to Visa’s card-to-card push payment solution Visa Direct, mobile payments, and real-time payment schemes as similarly important tools in businesses’ payment toolkits.

With the pressure growing for financial service providers to offer payment and settlement speed for their business clients, Mesler noted that it will be important for banks — both incumbents and challengers — to give careful consideration to how they compete. Traditional, larger financial institutions (FIs) are more commonly looking toward neobanks and FinTechs to understand how to become more agile and user-friendly, with B2B payments playing a larger role in their competitive positioning.

“That whole area of banking is changing and disrupting, and banks are trying to figure out what they want to do with payments,” said Mesler. “Some of those [traditional] banks have their own payment processing, but they can’t keep up.”

Consequently, the financial services vertical is one of Cashflows’ key focuses as it looks to broaden the reach of Anytime Settlement. With the pandemic driving digitization and creating cash flow crunches for businesses of all types, the ability to offer both speed and predictability of payment solutions has emerged as a vital requirement; according to Mesler, this shift has also become one of the biggest drivers of disruption in the banking industry overall.

“The entire disruption of how you do banking is pretty top of mind,” she said. “That’s where digitization has sped up as well.”